Mixed Inflation Picture To Result In Varying Central Bank Actions

CPI data for January has so far been mixed in Asia. Thailand and Indonesia saw a moderation in both core and headline whereas Korea and the Philippines saw them rise. This is likely that non-Japan Asian inflation ex China was stable around 5.4% in January but the core may have ticked up to 4.2%.

• Korean headline inflation rose to 5.2% y/y, the first increase since October due to electricity tariffs, but still well off its July peak of 6.3%. Core inflation rose to 5.0% y/y from 4.8% The BoK focuses on underlying inflation and while they are unlikely to be happy with the rise in core, ex utilities it was unchanged at 4.1%.
• Indonesian inflation eased to 5.3% y/y from 5.5%after peaking at 6% in September. Core, which Bank Indonesia is focusing on, eased back to 3.3% from 3.4% the previous month. The moderation in inflation was driven by lower fuel prices, which also resulted in a drop in administered price inflation. Supply side reforms are also helping to keep inflation contained. After 225bp of tightening this cycle, the January CPI data maybe enough for BI to pause.
• Inflation in Thailand also eased in January to 5% y/y from 5.9% and underlying to 3% from 3.2%, indicating that the recovery isn’t creating unmanageable price pressures. Base effects should keep core inflation down but the Bank of Thailand is likely to continue its gradual tightening given the expected tourism rebound.
• Inflation in the Philippines significantly exceeded expectations in January and rose to 8.7% y/y from 8.1%. Core was also higher at 7.4% from 6.9%, the highest since 1999. The central bank has tightened by 350bp this cycle and though the impact is expected to be felt on prices this year, the spread of inflation is likely to result in further hikes.